CHAPTER 3

TRANSPORTATION PROBLEMS
(MODELS)

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LEARNING OBJECTIVES

 Describing the nature and use of transportation

problems;
 Constructing the transportation model

 Solving transportation problems for feasibility and

optimality using the standard methods;

 Dealing with special cases of transportation
problems;

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3.1. TRANSPORTATION PROBLEM - MODEL
Meaning
 Transportation problems deal with the distribution of
goods from several points of supply (sources) to a
number of points of demand (destinations).
 They are usually applied to distribution type problems in
which supplies of goods that are held at various locations
are to be distributed to other receiving locations.
Objective of the Transportation Model
 to identify a distribution plan that would minimize the
cost of transporting the goods from the supply areas to
the demand areas taking into account supply capacities
and demand requirements as well as transportation
costs.
Application Areas
 Shipments from factories to warehouses
 Shipments between departments within a company
 Analysis and selection among location alternative
 scheduling production operations etc
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TRANSPORTATION PROBLEM – MODEL…
Necessary Conditions for the Model
a set of sending locations-origins(supply areas)
and a set of receiving locations-destinations
(demand areas).
Supply quantity (capacity) of each origin
Demand quantity of each destination
Unit transportation cost for each origin-
destination route
Assumptions
All goods are homogeneous
Transportation costs are a direct linear function
of the quantity shipped over any route
The total quantity available for shipment is equal
to the total quantity demanded

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Example 1
 Let’s consider that a firm has three factories /sources of supply/ from which it ships its
product out puts to four warehouses /point of demand/ located at various regions
where its customer bases are concentrated. The firm's production capacity at the three
factories, the demand for the four distribution centers located at various regions & the
cost of shipping each unit from each factory to the warehouses through each route is
given as follows:

Factories Weekly supply capacity/in units

F1 5000

F2 6000
F3 2500

Warehouses Weekly Demand quantity/ in

units
W1 6000
W2 4000
W3 2000
W4 1500
Cost (in Birr) per unit
From W1 W2 W3 W4
F1 3 2 7 6
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[email protected] 5 2 3 5
 3.2. SOLVING FOR TRANSPORTATION
PROBLEMS
Procedure
Step 1: Formulate the transportation table
 Set up a transportation table with M-rows
representing the number of supply areas and N-
columns representing the number of demand
areas.
Step 2: Obtain an initial basic feasible solution
North-West Corner Method (NWCM)
 Least Cost Method (LCM)

Conditions for feasibility

 it must satisfy all the supply and demand constraints
 The number of positive allocations must equal to m+n-1,

Step 3: Test the initial solution for optimality

 Two methods
 Stepping stone methods
 Modified distribution method( MODI)

Step 4: Repeat step 3 until optimal solution is

reached
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SOLVING FOR TRANSPORTATION PROBLEMS…
Example 1
Transportation Model
Required
a. Develop an initial feasible solution using the NWCM& LCM
b. Compute the total cost for this solution.

T Store 1 Store 2 Store 3 Store 4 Supply

F

F1 3 2 7 6 5000
F2 7 5 2 3 6000

F3 2 5 4 5 2500

Demand 6000 4000 2000 1500 13500

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SOLVING FOR TRANSPORTATION PROBLEMS…

Example 1
Initial Feasible Solution Using The NWCM

To
From
Store 1 Store 2 Store 3 Store 4 Supply

2 7 6
F1 5000 3 5000
3
F2 1000 7 4000 5 1000 2 6000
2 5
F3 1000 4 1500 5 2500

Demand 6000 4000 2000 1500

13500

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TRANSPORTATION SCHEDULE USING NWCM

OCCUPIED QUANTITY COST

CELLS
F1-S1 5000 $ 15000

F2-S1 1000 7000

F2-S3 4000 20000

F2-S4 1000 2000

F3-S3 1000 4000

F3-S4 1500 7500

TOTAL 13,500 $55,500

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SOLVING FOR TRANSPORTATION PROBLEMS…

Example 1
Initial Feasible Solution Using The LCM

To
From
Store 1 Store 2 Store 3 Store 4 Supply

7 6
F1 1000 3 4000 2 5000
5
2500 7 2000 2 1500 3
F2 6000

5 4 5
2500 2
F3 2500

Demand 6000 4000 2000 1500

13500
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TRANSPORTATION SCHEDULE USING LCM

OCCUPIED QUANTITY COST

CELLS
F1-S1 1000 $ 3000

F1-S2 4000 8000

F2-S1 2500 17500

F2-S3 2000 4000

F2-S4 1500 4500

F3-S1 2500 5000

TOTAL 13,500 $42,000

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3.3. OPTIMALITY TESTING - METHODS

A. Stepping-stone method
a close circuit path to evaluate the
 Follows

unoccupied cells/routes for possible

improvement of the present solution

B. Modified Distribution (MODI)

Method
 Means of finding the unused route with the
largest negative improvement index.

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1. STEPPING STONE METHOD
Rules for drawing each closed loop
1. Select an unused square (cell) to be evaluated.
2. Beginning at this cell, trace a closed loop going
clockwise and draw an arrow to an occupied cell in the
same row (or column).
3. Move vertically or horizontally (but never
diagonally) to another occupied cell “stepping–over”
unoccupied or occupied cells (if necessary) without
changing them.
4. Begin with a plus (+) sign at the unused cell, place
alternative (-) signs and (+) signs on each corner
square of the closed path just traced. I.e. At each turn
of the loop (the
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loop may cross over itself at times), 13
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STEPPING STONE METHOD (contd.)
5. There must be exactly one cell with a + sign and
exactly one cell with a - sign in any row or column in
which the loop turns.

6. An even no of at least four cells must participate in a

loop and the occupied cells can be visited once and
only once.

7. Repeat steps 1 to 4 until an improvement index has

been calculated for all unused squares (cells). If all
indices computed are greater than or equal to zero, an
optimal solution has been reached. If not, it is possible to
improve the current solution and decrease total shipping
costs.
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Optimality Testing-Methods… STEPPING STONE METHOD

EXAMPLE 3
 Use NWCM to find initial feasible solution of the
following problem
 Test and improve the solution using the stepping-
stone method
Project Project Project ss
A B C
F1 4 2 8 100

F2 5 1 9 200

F3 7 6 3 200

dd 50 150 300 500

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Optimality Testing-Methods… STEPPING STONE METHOD

EXAMPLE 3
INITIAL FEASIBLE SOLUTION-NWCM

Project Project Project

F To
A B C
ss
4 2 8
F1 50 50 100

5 1 9
F2 100 100 200

7 6 3
F3 200
200
dd 50 150 300 500

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TRANSPORTATION SCHEDULE USING NWCM

OCCUPIED QUANTITY COST

CELLS
F1-PA 50 $ 200

F1-PB 50 100

F2-PB 100 100

F2-PC 100 900

F3-PC 200 600

TOTAL 500 $ 1900

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Optimality Testing-Methods… STEPPING STONE METHOD

Testing Unoccupied Cells/Routes Using

The Closed Loop

Project Project Project

F To
A B C
ss
4 2 8
F1 50 50 100
+
5 1 9
F2 200
+ 100 100
7 6 3
F3 200
+ + 200
dd 50 150 300 500

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Optimality Testing-Methods… STEPPING STONE METHOD
Evaluation of the unoccupied cells/routes for possible
improvement of the initial feasible solution

UNOCCUPIED CELL COST DECISION FOR

CELLS EVALUATION IMPROVEMENT
(Yes or No)
F1-PC (8 + 1) – (9 + 2) = -2 YES
F2-PA (5 + 2) – (4 + 1) = +2 NO
F3-PA (7 + 2 + 9) – (4 + 1 + NO
3) = +10
F3-PB (6 + 9) – (1 + 3) = NO
+11
Move 50 units through the new Cell/Route =
F1-PC
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Optimality Testing-Methods… STEPPING STONE METHOD

NEW/IMPROVED TRANSPORTATION
SCHEDULE

Project Project Project

F To
A B C
ss
4 2 8
F1 50 0 100
+50
5 1 9
F2 150 50 200
7 6 3
F3
200 200

dd 50 150 300 500

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 TOTAL COST OF NEW/IMPROVED TRANSPORTATION
SCHEDULE

OCCUPIED QUANTITY COST

CELLS
F1-PA 50 $ 200

F1-PC 50 400

F2-PB 150 150

F2-PC 50 450

F3-PC 200 600

TOTAL 500 $ 1800

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Optimality Testing-Methods… STEPPING STONE METHOD
Evaluation of the unoccupied cells/routes for possible
improvement of the NEW/IMPROVED solution

UNOCCUPIE CELL COST DECISION FOR

D CELLS EVALUATION IMPROVEMENT
(Yes or No)
F1-PB (2 + 9) – (8 + 1) = +2 NO
NOT
F2-PA (5 + 8) – (9 + 4) = 0 MANDATORY/ALTERNATE
F3-PA (7 + 8) – (4 + 3) = NO
+8
F3-PB (6 + 9) – (1 + 3) = NO
+11
The improved solution is an OPTIMAL SOLUTION as
all the test results are non-negative. HOWEVER,
it has an ALTERNATE OPTIMAL SOLUTION (F2-
12/04/24 )
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Optimality Testing… Modified Distribution (MODI) METHOD
Steps in the MODI Method
1. For an initial basic feasible solution, calculate Ui and Vj ;
for rows and columns
Cij = Ui + Vj for all occupied cells (i , j)
Cell cost= Raw Index +Column Index
2. For unoccupied cells, calculate opportunity cost
Kij = Cij– Ui - Vj ; for all i and j.
I.e. cell cost –row index- column index
3. Examine the sign of each Kij :
 If Kij > 0, then current basic feasible solution is optimal.
 If Kij = 0, then the current basic feasible solution will remain be
unaffected but an alternative solution exists.
 If one or more Kij < 0, then an improved solution be obtained
entering unoccupied cell (i, j), with the largest negative value of Kij.
4.Solve the problem as you did using the stepping-stone
method.
5.Obtain a new improved solution by allocating units to the
unoccupied call and calculate the new transportation cost.
6. Test the revised solution for optimality.
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Optimality Testing-Methods… MODI METHOD
EXAMPLE 3
 Use NWCM to find initial feasible solution of the
following problem
 Test and improve the solution using the MODI method

Project Project Project ss

A B C
F1 4 2 8 100

F2 5 1 9 200

F3 7 6 3 200

dd 50 150 300 500

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Optimality Testing-Methods… MODI METHOD
EXAMPLE 3

INITIAL FEASIBLE SOLUTION-NWCM

Project Project Project ss

A B C
F1 4 2 8 100
50 50
F2 5 1 9 200
100 100
F3 7 6 3 200
200
dd 50 150 300 500

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TRANSPORTATION SCHEDULE USING NWCM

OCCUPIED QUANTITY COST

CELLS
F1-PA 50 $ 200

F1-PB 50 100

F2-PB 100 100

F2-PC 100 900

F3-PC 200 600

TOTAL 500 $ 1900

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Optimality Testing-Methods… MODI METHOD
Solution
 we begin by assigning a value of zero as the index for row 1 (U1=0).
 Once row index has been established, it will enable us to compute
column index numbers for all occupied cells in that row.
 once a column index number has been determined, index numbers for all
rows corresponding to occupied cells in that column can be determined.
the NWCM solution can be tested through the MODI as shown
below:

F To PA PB PC
Supply
Ui
4 2 8
F1
50 50 100
U1= 0
5 1 9
F2
100 100 200
U2= 1
7 6 3
F3
200 200
U3= -7

Demand 50 150 300 500

Vj V1= 4 V2= 2 V3= 10

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Optimality Testing-Methods… MODI METHOD
Evaluation of the unoccupied cells/routes for possible
improvement of the initial feasible solution

UNOCCUPIE CELL EVALUATION DECISION FOR

D CELLS (Cell Cost – row index- column IMPROVEMEN
index) T
OR
(Yes or No)
Kij = Cij– Ui - Vj
F1-PC (8 – 0 - 10) = -2 YES
F2-PA (5 – (-1) - 4) = +2 NO
F3-PA (7 – (-7) - 4) = +10 NO
F3-PB (6 – (-7) - 2) = +11 NO
Move 50 units through the new Cell/Route = F1-
PC

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Optimality Testing-Methods… MODI METHOD

NEW/IMPROVED TRANSPORTATION
SCHEDULE

Project Project Project

F To
A B C
ss
4 2 8
F1 50 0 100
+50
5 1 9
F2 150 50 200
7 6 3
F3
200 200

dd 50 150 300 500

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Optimality Testing-Methods… MODI METHOD
Evaluation of the unoccupied cells/routes for possible
improvement of the NEW/IMPROVED solution
UNOCCUPIE CELL EVALUATION DECISION FOR
D CELLS (Cell Cost – row index- column IMPROVEMEN
index) T
OR
(Yes or No)
Kij = Cij– Ui - Vj
F1-PB (2 – 0 - 0) = +2 NO
F2-PA (5 – 1 - 4) = 0 NO/ALTERNATE

F3-PA (7 – (-5) - 4) = +8 NO
F3-PB (6 – (-5) - 4) = +7 NO
The improved solution is an OPTIMAL SOLUTION
as all the test results are non-negative.
HOWEVER, it has an ALTERNATE OPTIMAL
SOLUTION
12/04/24 (F2-PA)
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 TOTAL COST OF NEW/IMPROVED TRANSPORTATION
SCHEDULE – MODI METHOD

OCCUPIED QUANTITY COST

CELLS
F1-PA 50 $ 200

F1-PC 50 400

F2-PB 150 150

F2-PC 50 450

F3-PC 200 600

TOTAL 500 $ 1800

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 EXERCISES
Exercise 1
a. Develop an initial feasible solution using the NWCM and
LCM.
b. Test the initial feasible solutions (NWCM & LCM) using:
 Stepping – stone Method
 MODI Method

c. Improve the solutions towards their optimality

T Store 1 Store 2 Store 3 Store 4 Supply

F

F1 3 2 7 6 5000
F2 7 5 2 3 6000

F3 2 5 4 5 2500

Demand 6000 4000 2000 1500 13500

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Exercises…
Exercise 2
a. Develop an initial feasible solution using the NWCM and
LCM.
b. Test the initial feasible solutions using:
 Stepping – stone Method
 MODI Method

c. Improve the solutions towards their optimality

T
Store 1 Store 2 Store 3 Store 4
F Supply
Plant 1 19 30 50 10 7
Plant 2 70 30 40 60
9
40 8 70 20
Plant 3 18

Demand 5 8 7 14 34
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 3.4. SPECIAL CASES IN TRANSPORTATION
PROBLEMS

I. Degeneracy
II. Alternative Optimal solutions
III. Prohibited Transportation Routes
IV. Unequal Demand and Supply
V. Maximization Problem

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3.4. SPECIAL CASES IN TRANSPORTATION PROBLEMS
I. Degeneracy
 This is a condition that occurs when the No of occupied cells in any
solutions is less than the No of rows plus the No of columns minus 1 in a
transportation table.
 No of occupied calls < m+ n -1 .....................Degeneracy
 Degeneracy may occur at two stages:
 when obtaining an initial solution
 During improvement (moving to wards optimal solution).

Adjustment
 allocating a very small quantity (close to zero) to one or more
unoccupied cell/s so as to get m+n-1 = number of occupied cells.
 This amount is denoted by a Greek letter  (epsilon) or (delta). This
quantity would not affect the total cost as well as supply and
demand values.
  = Almost zero
Where to place delta/epsilon
 it should be allocated to a cell that has the smallest transportation cost.
it cannot be placed in a cell which later turns out to be in a negative
position of a cell path involved in reallocation because epsilon/delta
will be the “smallest quantity a negative position “ and shifting that
minute quantity around the cell path will leave the solution virtually
unchanged.

12/04/24Its placement should enable us evaluate all unoccupied cells in the table
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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
Example 1
Initial Feasible Solution Using The NWCM

T Store 1 Store 2 Store 3 Store 4 Supply

F

F1 5000 3 2 7 6 5000
F2 1000 7 4000 5 1000 2 3 6000

F3 2 5 1000 4 1500 5 2500

Demand 6000 4000 2000 1500 13500

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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
Example 1
Improved Solution # 1- DEGENERACY

T Store 1 Store 2 Store 3 Store 4 Supply

F

F1 5000 3 2 7 6 5000
F2 7 4000 5 2000 2 3 6000

F3 1000 2 5 4 1500 5 2500

Demand 6000 4000 2000 1500 13500

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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
Example 1
Adjustment: place Δ in cell F1-S2 and proceed as
usual

T Store 1 Store 2 Store 3 Store 4 Supply

F

F1 5000 7 6 5000
3 Δ 2
F2 7 4000 5 2000 2 3 6000

F3 1000 2 5 4 1500 5 2500

Demand 6000 4000 2000 1500 13500

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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
II. Alternative Optimal solutions
The existence of alternative optimal solution can
be determined by an inspection of the
opportunity costs, Kij for the unoccupied cells.
If an unoccupied cell in an optimal solution has
opportunity cost of zero, then an alternative
optimal solution can be formed with another set
of allocations without increasing the total
transportation cost.

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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
EXAMPLE 2
 INITIAL FEASIBLE SOLUTION-NWCM
 Improvement of the NWCM leads to
ALTERNATE OPTIMAL SOLUTION

Project Project Project ss

A B C
F1 4 2 8 100
50 50
F2 5 1 9 200
100 100
F3 7 6 3 200
200
dd 50 150 300 500

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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
III. Prohibited Transportation Routes
 This case arises when it is not possible to transport goods from certain
sources to certain destinations.
 This may happen due to circumstances such as road hazards (snow,
floods, etc), traffic regulation, equipment break down, labour problem
etc,.
Adjustment
 assign a cost 10 times the largest cost in the table and then it will
be uneconomical to transport to that cell OR assign M to this route.
 Then do as usual. (Initial feasible solution by LCM and optimal
solution by MODI)
Example 3

A B C D Supply
S1 1 5 3 3 34

S2 3 3 1 2 15
S3 6 2 2 4 12

S4 2 7 2 4 19
Demand 21 25 17 17 80
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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
Note that due to uncontrollable reason it is
impossible to transport from S3 to B. So to solve the
problem fist adjust it as follows .
 The cell cost of S3B i.e. 2 will be replaced by 70 i.e. 7 * 10,
because 7 is the largest cost in the table.
 Then do as usual.

A B C D Supply

S1 1 5 3 3 34

S2 3 3 1 2 15

S3 6 M 2 4 12

S4 2 7 2 4 19

Demand 21 25 17 17 80

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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
IV. Unequal Demand and Supply
 Where the total periodic supply quantity is not equal to
that of demand, the problem is labeled unbalanced. Both
quantities are assumed to be equal, as required in the
transportation solution procedure.
Adjustments
 Convert the unbalanced TP into a balanced TP by using du
mmy destination/dummy source.
 If total Supply > Total demand, then create a fictitious or
artificial destination called dummy destination i.e.: total
Supply > Total demand===> Add dummy column
 But if excess demand (Supply < demand) exists add a dummy
source (add a dummy row)
 the cost of “shipments” to the dummy is usually set at
zero ==> No real cost. This means that the cells in the
dummy row/column are assigned with zero costs to
indicate that transportation is not really going to take
place through these cells.
 Allocation to the dummy cells should take place last.
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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
Example 4
 Consider the following TP
Required
a. Obtain the basic feasible solution using NWCM
b. Obtain the optimal solution
c. What is the optimal shipping cost?

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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
V. Maximization Problem
 Organizations that specialize in providing transportation services, work
on transportation type problems with profit (revenue) maximization
objectives.
Adjustments
 first change the problem to a minimization type.
The steps are:
 Select the largest unit profit from the entire transportation table
 Subtract each cell profit/value from the selected/ largest cell profit
 Use the new figures to formulate the minimization/opportunity loss
table
 follow the standard procedure to solve for the problem
Example 5

T A B C SS
F

1 6 8 10 150
2 7 11 11 175
3 4 5 12 275
DD 200 100 300 600
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SPECIAL CASES IN TRANSPORTATION PROBLEMS…
Solution
 To change the above maximization problem to a minimization type
first identify the largest unit profit from the cell (12) then subtract
all the cells values from this largest selected value as indicated
below( 12-6=6, for cell1A, 12- 8=4, etc ).
 This yields opportunity loss figures.
 Then proceed as usual.
 For example if we use LCM to develop the initial solution and MODI
for optimality test the solution will be as illustrated here under:

A B C SS
F
1 6 4 2 150
150

2 5 1 1 175
50 100 25

3 8 7 0 275
275

12/04/24 DD 200
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